"We’re probably not going to be too shy of £200bn of product transfer business in 2019, which is a considerable amount of lending to add to the overall gross lending figure."
The figures show that, with gross mortgage lending of £22.2bn in December, the total amount for 2019 was £265.8bn, 1.1% down on the previous year’s £267.5bn. It is a small drop in the grand scheme of things and, in my view, doesn’t necessarily tell the full story of the year as a whole and what might happen in 2020.
For starters, that £265.8bn does not include product transfers and, it does not take a genius to work out we’ve been witnessing a notable increase in this type of business in recent years. Indeed, given that we’ve not known the true size of the product transfer market until very recently, one suspects that the greater transparency has provided its own particular fillip to this sector, not forgetting the considerable investment and resource lenders are putting into this area, although intermediaries still place the majority of this business.
While we do not have product transfer figures for the whole of 2019, we do know there was £43bn of this business completed in Quarter 3 alone, and I suspect – given the lending story towards the end of the year – that this figure might have been surpassed in Quarter 4.
Given this, we’re probably not going to be too shy of £200bn of product transfer business in 2019, which is a considerable amount of lending to add to the overall gross lending figure. Although I, like many others in the market, have considerable concerns about the amount of product transfer business that is being conducted on an execution-only basis. That is a worrying trend given the lack of advice and the lack of consumer protections, although given the regulatory direction of travel, I think we may have to prepare ourselves for more of these types of transactions in the years ahead.
The strength of the product transfer sector is probably one of the core reasons why UK Finance is predicting gross mortgage lending to fall again this year, down to a projection of £254bn. Although, again, if you put both gross lending and product transfer activity together, my view is that the overall figure might actually motor past 2019’s figures.
And there are also a number of factors that may help deliver further mortgage market growth – for instance, a sustained post-Election ‘Boris Bounce’, perhaps further helped by stamp duty changes, and it’s my belief that the intermediary lending/advisory market as a whole has the opportunity to develop greater levels of activity/lending with a concerted push to consumers, particularly those who think they are stuck on their current mortgage rates with no chance of remortgaging.
Recent data suggests that the end of 2019 went considerably better than many were anticipating; even prior to the results of the General Election being known, the market was showing increased signs of strength. And gross mortgage lending in December was a healthy 6.5% up on the same month in 2018.
Also, given the way that we have started 2020 and conversations I’ve had with market stakeholders, there has to be the anticipation that this momentum will continue to grow. We’ve had record weeks of activity during January, and it would seem that in both purchasing and remortgaging, advisers are seeing an increased stream of clients, perhaps now more confident of the future politically and economically in order to make their moves.
That’s incredibly good news for advisers because, while intermediary distribution of mortgages tends to still be in the 70-75% region, there is still a considerable amount of business to aim at. Some borrowers will never take advice, but there are others who either aren’t aware of the benefits, or don’t know where to access advice, or (as mentioned) just think they have no options in this market at all. Again, that might not be the case, however until an adviser looks at their circumstances, they might never know.
So, while on the face of it, the official UK Finance figures and predictions might seem somewhat downbeat, the reality of the market is (I think) somewhat different. The year has kicked off at a great pace, and with good marketing and messaging, there are opportunities for advisers not just to pick up the mortgage business, but to take their ancillary sales to a new level, be that protection, GI, conveyancing, etc.
2020 has plenty of potential – now is the time to grasp it.
